European Commission approves Nexen Tire investment

The European Commission has approved regional investment of almost €117million for the passenger car tyre factory Nexen Tire intends to build in the Czech Republic. The Commission found the aid that government trade agency CzechInvest offered Nexen for the facility in Žatec is compatible with EU state aid rules, and deemed it will promote regional development without unduly distorting competition in the internal market.

“This tyre production plant will create at least 1,000 new jobs in Žatec and contribute significantly to the economic development of the region,” commented EU Commissioner in charge of competition policy, Margrethe Vestager. “I am pleased we today (23 July) approved state aid to make this happen – It is a good use of public money in line with EU state aid rules.”

The Czech Republic informed the European Commission of plans to support the construction of Nexen’s plant by offering a total of €116.8 million, an amount that includes a direct grant of €39.7 million, an employment grant of €10.1 million and about €67 million arising from tax relief and from the authorities selling the site for the plant at a reduced price.

According to the European Commission, the factory will be built with a total investment of €769 million. It is expected to create at least 1,000 new jobs in Žatec, a town within the Severozápad region – an area with high unemployment and a standard of living below the EU average, and therefore eligible for regional aid under EU state aid rules (Article 107(3)(a) of the Treaty on the functioning of the European Union).

The Commission assessed the project under the Regional Aid Guidelines 2007-2013, and in particular its rules on large investment projects. It found that even when taking the CzechInvest investment into consideration, Nexen’s market share will remain below the 25 per cent limit, and the new plant’s production capacity will not increase the market total beyond the five per cent allowed.

The Žatec plant is expected to commence operation in 2018 and will have a final capacity of more than 12 million units.